IBM Still Leads. HP Closing the Decline Gap

August 21, 2015

Hewlett-Packard said on Thursday that its profit fell 13 percent in the third quarter, a reminder of the grim challenges prompting a break-up of the company in the coming months. The Gray Lady played it straight, pointing out:

The company said its net income for the quarter, which ended July 31, fell to $900 million, or 47 cents a share, from $1 billion, or 52 cents a share, in the same period a year earlier. Net revenue fell 8 percent, to $25.3 billion, from $27.6 billion a year ago. I read several reports about Hewlett Packard’s financial statements which cushion the impact of revenue decline.

The Enterprise Group experienced a modest 2 per cent annual gain, with total revenue for the quarter at $7bn. Once again, sales of industry standard servers were up an encouraging 7.7 per cent. But the higher-margin “business critical systems” saw sales slump 21 per cent, year on year. Technology services revenue was also down 9.3 per cent. Curiously, however, sales of networking equipment were up 22.5 per cent. Things weren’t so great on the Enterprise Services side, however, which saw its revenue dip to $4.98bn, an 11 per cent year-on-year decline. Infrastructure outsourcing was down 13.1 per cent, while application and business services was down 7.4 per cent.

IBM leads in the declining revenue race, however. IBM has 13 straight quarters of decline. HP will split into two companies whose value may be dragged down by the company’s performance. If the split does not take place, HP may have a chance to eat into IBM’s lead in the downhill slide, pro division.

Watson may turn around IBM. HP seems to be wrestling with its Autonomy deal. Both companies bet big on search and content processing. I wonder how the senior managers at each firm views the upside of whiz bang information access technology.

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Stephen E. Arnold monitors search, content processing, text mining
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